Dogecoin recorded figures of $5.5 billion in Open interest, reflecting high trader speculation
Critical $0.36 support level could determine whether Dogecoin’s rally continues or reverses
Dogecoin’s [DOGE] rally above the critical $0.39 resistance has reignited bullish sentiment, but the sustainability of this momentum hangs in the balance. With $0.36 emerging as a pivotal support zone, a breach below this level could signal a bearish reversal, putting recent gains at risk.
Adding to the intrigue, Dogecoin recently hit a record $5.5 billion in Open Interest, reflecting heightened trader activity and speculation. Does this rally have the strength to continue, or is a bearish shift on the horizon?
Dogecoin – Testing key levels
Dogecoin was trading at $0.3983 at press time, facing strong resistance near $0.40 as seen on the daily chart. The RSI seemed to be nearing the overbought zone, signaling that bullish momentum could be slowing.
Despite this, however, the OBV maintained a steady upward trajectory – A sign of solid trading volume and market interest.
Source: TradingView
The critical support at $0.36 remains a crucial level to watch.
A sustained break below this could trigger bearish sentiment, potentially nullifying recent gains. Conversely, a move above $0.40 could validate further bullish momentum, targeting $0.45 in the near term.
What happens if DOGE breaks below $0.36?
A breach of the $0.36 support level could mark the onset of a bearish reversal for Dogecoin. Historically, this level has acted as a significant demand zone. And, breaking below it might trigger panic selling and increase downward pressure.
If $0.36 fails to hold, DOGE could retrace towards $0.33, the next visible support on the daily chart. A further drop could expose DOGE to $0.30, eroding much of the latest bullish momentum. Declining network activity or a dip in whale accumulation could further exacerbate the market’s sell-off.
The Sharpe Ratio, a key measure of risk-adjusted returns, has registered a consistent uptick for Dogecoin in recent months, hitting a peak of 7.80.
This indicated that DOGE has delivered strong returns relative to its risk, reflecting improving investor confidence and favorable market conditions.
Source: Messari
However, the steep fluctuations seen earlier in the ratio can be used to highlight the volatile nature of Dogecoin’s price action. While the prevailing high Sharpe Ratio underscores strong bullish momentum, sustainability will depend on maintaining critical support levels – Particularly the $0.36 zone.
A sustained hike in the Sharpe Ratio could further validate Dogecoin’s resilience and potential for higher gains, but any downturn may signal a broader market correction. Especially if coupled with declining volume or waning investor interest.
As traders weigh risk and reward, the next few weeks will be pivotal in determining whether Dogecoin can sustain its rally or succumb to a bearish reversal.
Samantha is a full-time crypto journalist with 2 years of writing experience in the field. Her key area of interest is the political ramifications of crypto-centric laws around the world. An avid market trader, Samantha also has a keen eye for price anomalies on trading charts.